If you’re well aware that analyzing business metrics is the key to growing your business, no matter how small or large your business currently is, you may be curious about working out your customer acquisition cost. As this valuable figure will give you an insight into how easily your business is currently accumulating new customers and growing its market share. Thankfully if you’re concerned that calculating your customer acquisition cost may be a difficult process, think again. As calculating your true customer acquisition cost is an easy, straight forward task which you should be able to complete on your own.
A guide to using the customer acquisition cost formula:
What is your customer acquisition cost?
What is your customer acquisition cost formula? It is the average price that your business has invested in order to acquire a new customer or client. Ideally the newer your business is, the lower you should expect your customer acquisition cost to be as the fewer individuals in your business’ target audience have heard of your business, the easier it will be for your business to target these individuals without needing to spend large amounts of money on sales and marketing techniques and campaigns.
How to work out your current customer acquisition cost:
If you’re ready to work out your customer acquisition cost for the past 12 months, to get a great overall picture of how well your business has acquired new customers in the last 12 months, start by figuring out all of your business’ sales related costs and marketing related costs. Once you’ve figured out all of these costs, add them together to figure out how much capital your business has spent on trying to acquire new customers or clients in the past 12 months.
As you may have guessed, your next task will be to work out exactly how many new customers have shopped with your business in the past 12 months. Once you have this figure, all you will need to do is to divide your second figure, which is the number of new customers which you have picked up over the past 12 years, by your first figure. The number that you’re left with will be your customer acquisition cost and on average how much your business has spent on acquiring each new customer that you’ve picked up in the last 12 months.
What to do with the information that you’ve acquired:
Once you’ve worked out your customer acquisition cost, it’s time for you to evaluate whether you believe that you’ve spent too much on acquiring new customers and should rethink your marketing business costs or whether you’re happy with the current amount which you pay to acquire each new customer that chooses to shop with your business.
So if you’re ready to discover how much money that your business is actually spending on acquiring new customers, it’s well worth using the information above in order to get started! As the sooner that you discover your true customer acquisition cost, the sooner you’ll be able to grow your business.
Infographic created by Fiserv,